Bill would limit municipal bankruptcies in California

The almost unfettered power that unions possess in California takes one's breath away. One place that is not the case is in Chapter 9, a.k.a., municipal bankruptcy. In Chapter 9, a city can renegotiate union contracts in a fair and open forum. But the California Senate is trying to limit the right of municipalities, including hospitals and water districts, to file Chapter 9.

The Senate Local Government Committee on Monday approved legislation that would require cities to first secure permission from an obscure appointed state agency before they could file for bankruptcy.

That panel would have the authority to force cities and local districts, including those providing water service and hospital care, to slash budgets elsewhere before seeking bankruptcy protection.

“It’s a bad idea,” Jay Goldstone, the city of San Diego’s chief operating officer, said in an interview. “The state should not be dictating whether a local government does or does not qualify for bankruptcy. … That’s what the courts should be for.”

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Coincidentally, Goldstone is one of the appointees to the California Debt and Investment Advisory Commission, which would be granted the new oversight power. The commission now provides local governments with advice and technical assistance on debts and investments.

Bankruptcy is not a job for the commission, Goldstone said.

“This just adds another bureaucratic layer at a time when we probably need less bureaucracy, not more,” he said.